Stock Index Enhancement strategy with index futures
1.1 Basis of the strategy design Since 20th Dec,2019 to 30th Nov,2021, annualized return from hold and roll front month IF contract is 14.7%,annualized return from hold and roll current quarter IF contract is 13.2%.
The annualized excess returns are 4.7% and 3.2% respectively.
Since 20th Dec,2020 to 30th Nov,2021, annualized return from hold and roll front month IC contract is 28%, annualized return from hold and roll current quarter IC contract is 26.6%.
The annualized excess returns are 9.7%, 8.3%.
1.2 Why there is positive return for long front month and short rear month arbitrage strategy?
Calculation of premium or discount rate: (futures – stock) / stock * 360 / remaining days to futures expiry
Phenomenon 1: mostly, the hedging cost of IC front month contract is expensive than which of IC rear month contract
Phenomenon 2: The annualized cost to short roll IC front month contract to IC near month contract is increasing when approaching the date of expiry
1.3 The back test of strategy of long front month contract and short rear month contract
This strategy performed not bad before year of 2020, but the snowball strategy disturbed lots on this strategy when entering year of 2021
Entering year of 2021, CSI500 Index has the obvious negative correlation with net long positions holdings of top 20 members, which hints when CSI500 index was in weakness, the dominant funds will buy more IC contracts. When CSI500 index performed strong, the dominant funds will reduce long positions of IC.
1.4 Estimated asset amount of snowball products linked to CSI500 Index (Beneficial Certificate)
Assumption 1: As of Aug,2021, the existing amount of beneficial certificate is around 400 billion yuan, among it, about 30% is non-fixed income products, with amount of about 120 billion yuan.
Assumption 2: Assuming 70% of the non-fixed income products is the snowball products, then the asset amount of snowball products is 84 billion yuan.
Assumption 3: Assuming there is 75% of the snowball products linked to CSI500 Index, then it is calculated that the asset amount of snowball products linked to CSI500 Index is 63 billion yuan.
Assumption 4: At the end of August, the price of CSI500 Index is 7255, assumed 30% to hedge, the holding positons of IC should be 13000 lots.
1.5 Estimated asset amount of snowball products linked to CSI500 Index (OTC options)
Assumption 1: As of August,2021, the existing amount of OTC options is around 800 billion yuan.
Assumption 2: Assuming there is 10% of the snowball products linked to CSI500 Index, then it is calculated that the asset amount of snowball products linked to CSI500 is 80 billion yuan.
Assumption 3, At the end of August, the price of CSI500 Index is 7255, assumed 30% to hedge, the holding positions of IC should be 16500 lots.
1.6 Method of optimization:
When annualized discount rate of current quarter contract larger than -4% or
when annualized discount rate of current month contract - annualized discount rate of current quarter contract larger than 2%,
Then do long front month contract short rear month contract for 2 days, the annualized return of this strategy with timing optimization is 5.19% with max drawdown of 1.38%
2019年12月20日至2021年11月30日，滚动持有IF当月年化收益率14.7%， 滚动持有IF当季年化收益率13.2%， 年化超额收益率分别为4.7%，3.2%。
引入年化折溢价率：（ 期货- 现货）/ 现货 *360 / 期货距离交割日自然日
假设2： 假设有10% 为挂钩中证500的雪球结构，则500雪球结构规模为800亿
假设3： 8月底中证500指数价格为7255， 按照3成仓位估算IC持仓量约为16500手
1.6 优化方案： 纳入择时项
若当季合约年化折溢价率大于 -4% 或当月合约年化折溢价率 – 当季合约年化折溢价率 大于2%， 则进行两日买近卖远交易， 择时后策略年化收益率 5.19%， 最大回撤 1.38%。